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<C  51 

Boston,  Massachusetts 
November  17,  1919. 

Eastern  Association  of  Glass  Distributors, 

New  York  City,  N.  Y. 

Gentlemen: 

In  accordance  with  your  instruction,  we  have 
made  a  survey  of  the  glass  jobbing  business,  using  as 

a  basis  certain  companies  designated  by  a  Committee  ap- 

% 

pointed  by  your  Executive  Board. 

The  purpose  of  this  survey  was  twofold,  viz., 
(1)  to  determine  the  average  cost  of  doing  business  in 
the  departments  of  plate,  window,  and  rolled  glass,  ex¬ 
clusive  of  direct  shipments,  and  (2)  to  outline  sugges¬ 
tions  leading  to  a  uniform  system  of  accounting. 

The  conclusions  reached  in  the  report  here¬ 
with  submitted,  are  based  on  data  and  impressions  ob¬ 
tained  from  ten  organizations,  which  we  understand  are 
typical  of  the  trade. 

Respectfully  submitted, 

MOYER  &  BRIGGS 
By  Orlando  C.  Moyer 


Certified  Public  Accountant. 


EASTER1T  ASSOCIATION  OF  GLASS  DISTRIBUTORS 


AVERAGE  COST  OF  DOING  BUSINESS 

•  <D  •  •  •  •  ft 


By  the  cost  of  doing  business,  as  used  by  the  trade 
is  meant  the  ratio  of  expenses  to  sales.  To  determine  this 
average  ratio  it  is  necessary  that  we  have  at  least  two  rea¬ 
sonably  pure  factors,  viz.,  sales  and  expenses.  To  show 
this  ratio  for  the  departments  of  plate,  sheet,  and  rolled 
glass,  it  is  necessary  that  the  sales  and  expenses  be  classi 
fied  with  respect  to  these  departments,  as  well  as  for  other 
departments.  To  make  its  use  effective  the  average  will 
have  to  be  shown  by  classes  of  expenses. 

Reasonable  Assumption  without  Foundation: 

It  is  quite  apparent  that  the  majority  of  the  mem¬ 
bers  of  the  Association  assumed  that  the  glass  jobbing  busi¬ 
ness  was  conducted  on  a  basis  which  would  make  it  possible 
to  construct  this  data  from  information  already  compiled, 
with  reasonable  adjustments.  We  are  satisfied  that  this 
most  reasonable  assumption  is  without  foundation,  and  that 
the  average  jobber  -  if  not  the  great  majority  -  dees  not 
know  and  has  not  seriously  thought  about  the  cost  of  doing 
business  by  departments.  We  must  refrain  from  mentioning 
the  number  of  jobbers  having  any  sound  basis  for  the  distri¬ 
bution  of  expenses.  Certain  departments  may  not  pay  if  a 
proper  distribution  of  expenses  were  made. 

Averages  of  Doubtful  Value: 

Knowledge  of  the  average  cost  of  doing  business,  is 
of  no  benefit  to  any  individual  company,  unless  such  average 
reflects  reasonably  correct  ratios  of  particular  departments 
in  which  it  is  interested.  However  consoling  or  depressing 
such  information  might  be,  it  would  not  assist  the  executive 
in  solving  any  problem,  unless  the  average  costs  of  doing 
business  be  shown  in  analytic  form  so  that  the  lessons 
learned  by  it  may  be  definite,  pointing  more  directly  to  the 
reasons  why  the  net  result  is  high  or  low. 

Unless  analytic  reports  be  furnished,  which  show 
proper  or  at  least  uniform  distribution  of  expenses,  it  is 
evident  that  the  percentage  results  which  could  be  shov/n, 
would  be  confusing,  misleading,  and  positively  harmful  to 
anyone  attempting  to  base  his  decision  upon  them,  and  unless 
such  averages  can  be  safely  used  their  compilation  is  with¬ 
out  value. 

Some  Practical  Difficulties : 

Some  of  the  difficulties  met  are  as  follows: 

Sales  not  classified  by  departments;  direct  ship¬ 
ments  from  factory  to  customers  not  segregated;  expenses  per- 


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EASTERN  ASSOCIATION  OF  GLASS  DISTRIBUTORS 


AVERAGE  COST  C'F  DOING  BUSINESS 


Some  Practical  Difficulties:  (Contd.) 

taining  to  some  departments  charged  to  purchase  accounts;  de¬ 
partmental  operating  expenses,  and  such  items  as  r<-nt,  taxes, 
insurance,  and  depreciation,  were  not  distributed  by  depart¬ 
ments;  distributions  of  expenses  were  used  in  several  instan¬ 
ces,  but  on  the  principal  of  "what  the  department  would 
stand";  items  making  up  a  rental  equivalent  were  not  shown 
separately  and  were  included  in  similar  accounts  but  which 
were  subject  to  different  application;  auxiliary  departments 
such  as  glazing,  sash,  packing,  are  in  some  instances 
grouped  with  the  departments  under  .investigation. 

In  some  instances,  we  asked  for  an  expense  distribu¬ 
tion,  but  the  results  obtained  by  this  method  were  suffi¬ 
ciently  unreliable  to  preclude  their  use  in  build-ing  up  aver¬ 
ages  for  serious  purposes. 

Does  the  Glass  Jobber  know  his  Profits? 

If  the  inventories  at  both  beginning  and  end  of 
each  year  are  taken  at  cost,  and  income  and  expenses  have 
been  correctly  adjusted  as  between  years,  and  fair  reserves 
have  been  set  up  for  depreciat ion ,  etc.,  and  the  books  have 
been  accurately  kept,  we  can  probably  answer  "yes".  If 
these  things  have  not  been  done,  the  answer  is  "no". 

As  to  knowing  departmental  profits,  the  answer  with 
most  executives  must  probably  be  "no". 

It  is  generally  considered  unsound  business  prac¬ 
tice  and  hazardous  financial  procedure  to  conduct  a  trading 
business  without  knowing  the  profits  or  losses  accruing  from 
its  principal  lines  of  trade,  both  monthly  and  annually. 

Result  of  this  Inves tigation: 

The  Association  did  not  get  what  it  asked  for  be¬ 
cause  its  members  are  not  doing  business  by  sufficiently  uni¬ 
form  methods  to  make  it  feasible  to  compile  the  data  desired. 

Were  such  information  compiled,  at  anjr  cost,  its 
greatest  value  would  be  lost  because  of  the  lack  of  suffi- 
cently  uniform  accounting  methods  to  make  comparisons  possi¬ 
ble  by  particular  companies. 

The  investigation  undertaken,  therefore,  while  not 
giving  the  direct  information  desired,  has  resulted  in  great¬ 
ly  emphasizing  the  need  for  such  data,  and  has  also  very 


3 


EASTERN  ASSOCIATION  OF  GLASS  DISTRIBUTORS 


AVERAGE  COST  OF  DOING  BUSINESS 


•  •  •  •  •  •  • 

Result  of  this  Investigation:  (Contd.) 

definitely  disclosed  the  course  of  procedure  the  members  of 
the  Association  must  take  to  add  stability  to  the  trade. 

At  a  time  when  the  demand  for  glass  is  high,  and 
the  market  strong,  the  wise  glass  jobber  will  give  attention 
to  his  accounting  department,  so  that  he  may  find  himself, 
and  be  fully  prepared  for  the  period  of  keen  competition, 
and  greatly  reduce  margins. 


EASTERN  ASSOCIATION  OF  GLASS  DISTRIBUTORS 


SUGGESTIONS  FOR  UNIFORM  ACCOUNTING  PRACTICE 


Uniform  Executive  Requirements : 

All  glass  jobbers  are  alike  entitled  to  receive  ade¬ 
quate  information  from  their  accounting  departments. 

Such  information  is  equally  important,  whether  the 
business  be  large  or  small.  It  must  be  reliable,  available 
at  regular  intervals,  comprehensive  without  being  cumbersome, 
and  arranged  in  a  form  easily  comprehended  and  readily  ap¬ 
plied.  It  should  not  be  fragmentary,  but  .complete  when  pre¬ 
sented.  It  should  not  have  to  be  requested  but  instead  will 
reach  the  executive  as  a  matter  of  routine.  As  to  detail, 
it  will  meet  individual  requirements .  The  executive  will 
soon  learn  to  depend  upon  this  data  as  a  basis  for  making 
current  months'  decisions. 

Scope  of  Financial  Record: 

Such  a  record  should  include  (1)  the  Balance  Sheet 
or  Statement  of  Condition,  and  (2)  the  Profit  and  Loss  or 
Trading  Statement. 

These  statements  ?;hen  properly  constructed  and  elab¬ 
orated  will  indicate  to  what  extent  the  business,  as  a  whole, 
is  conducted  cn  a  profitable  basis,  and  whether  the  general 
tendency  from  month  to  month  is  favorable  or  unfavorable. 

The  departmental  subdivisions  of  the  trading  account 
will  localize  the  required  information.  These  will  show 
both  the  results  of  the  current  month  as  well  as  the  total 
to  date  for  the  year. 

Percentages  will  be  shown  monthly  and  will  reflect 
the  course  any  department  is  taking. 

This  record  may  also  contain  other  data  of  impor¬ 
tance,  such  as  budgets,  insurance  carried  on  stock,  quantity 
records,  business  by  territory,  relative  value  of  sales 
persons,  etc. 

Trade  Departments : 


There  should  be  separate  accounting  with  the  follow 
ing  trade  departments: 

Plate  glass;  Sheet  glass;  Rolled  glass;  Factory;  Sash, 
Door  &  Blinds;  Store  Front  Construction;  Glazing;  Paint, 

etc.;  Miscellaneous. 


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EASTERN  ASSOCIATION  OF  GLASS  DISTRIBUTORS 
SUGGESTIONS  FOR  UNIFORM  ACCOUNTING  PRACTICE 


9  9  •  •  •  •  • 

Warehouse  &  Direct  Shipments  (Factory): 

In  each  of  the  departments  of  Plate,  Sheet,  and 
Rolled  Glass,  the  sales  and  purchases  must  be  divided  as  be¬ 
tween  Warehouse  and  Direct  or  Factory  Shipments. 

Expense  Departments : 

For  purposes  of  distribution,  the  classification 
should  also  show  such  expense  departments,  as  the  following. 
Other  groups  may  be  provided  for,  depending  upon  particular 
conditions.  Packing;  Carting;  Heat,  Light  &  Power;  General 
Warehouse. 

Monthly  Departmental  Results: 


Operating  results  should  be  shown  monthly  in  a 
Financial  Record.  The  data  for  same  should  be  compiled  as 
follows : 

(1)  Sales  from  General  Ledger;  (2)  Cost  of  Sales  either 
from  General  Ledger  or  independent  compilations;  (3)  Operat 
ing  expenses  from  Expense  analysis  book  under  each  depart¬ 
ment;  (4)  Selling  and  Administrative  expenses  from  Expense 
Analysis  book. 

Fiscal  closing  of  General  Ledger: 

When  books  are  closed  annually,  the  Operating,  Sell 
ing,  and  Administrative  expense  accounts  should  be  distribu¬ 
ted  giving  expression  to  each  departmental  * s  expenses 
arranged  by  groups.  By  this  method  the  general  ledger  is 
made  to  show  concise  information  of  each  department  for  per¬ 
manent  record. 

Expense  Controls: 

In  order  to  simplify  general  ledger  expense  con¬ 
trols,  we  suggest  the  following  general  ledger  accounts: 

Operating  Expenses;  Selling  Expenses,  and  Administrative 
Expenses . 


Each  of  these  accounts  would  be  supported  by  sepa¬ 
rate  sections  in  an  expense  analysis  book. 

This  same  analysis  book  may  contain  the  departments 
showing  the  expense  analysis  after  final  dis tribution. 


6 


EASTERN  ASSOCIATION  0?  GLASS  DISTRIBUTORS 


SUGGESTIONS  FOR  UNIFORM  ACCOUNTING  PRACTICE 


Opera  tin  g  Expense  Groups: 

All  operating  expenses  should  first  be  classified 
according  to  original  purpose  of  expenditures,  without  re¬ 
gard  to  departmental  allocation.  This  will  facilitate  com¬ 
prehensive  analysis  without  reference  to  unnecessary  detail. 
We  suggest  the  following  groups: 

Wages  and  Salaries;  Ren  j  X  Li/  A0  O  ;  Insurance;  Heat,  Light, 
Power  &  Water;  Maintenance  &  Repairs;  Supplies;  Freight  & 
Carting;  Depreciation;  Miscellaneous. 

Proration  of  Expenses : 

Wages  &  Salaries: 


The  Pay  Roll  Analysis  sheet  will  show  by  depart¬ 
ments  where  the  time  was  applied,  whether  in  departments  of 
Plate,  Glazing,  Packing,  Carting,  Etc. 

Further  distributions  may  be  made,  such  as  Labor¬ 
handling  mirror  glass,  Plate  glass  cutters,  etc.  This  prin¬ 
ciple,  however,  will  be  developed  only  as  required  by  parti¬ 
cular  executives. 

Rent : 

Whether  paid  as  such  or  estimated  as  rent  equiva¬ 
lent,  it  will  be  apportioned  in  ratio  of  floor  space  used. 

No  attention  should  be  paid  to  the  fact  that  one  part  of  a 
building  is  worth  more  per  foot  'than  some  other  part.  Space 
devoted  to  office  should  be  ignored  and  its  cost  distributed 
in  the  total  as  above  stated. 

Taxes : 


Those  pertaining  to  land  and  buildings  owned  are  dis 
tributed  to  the  Plant  Real  Estate  Expense  account  or  group. 

Taxes  on  machinery  and  equipment  should  be  prorated 
in  ratio  of  equipment  in  departments. 

State  corporation  taxes  may  be  distributed  on  esti¬ 
mated  basis  of  business  done  in  the  several  trade  depart¬ 
ments,  but  should  remain  constant  from  month  to  month,  and 
may  be  adjusted  annually. 

Income  taxes  should  not  be  charged  to  Operating, 
but  to  a  separate  General  Ledger  account. 


-  7  - 


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EASTERN  ASSOCIATION  OF  GLASS  DISTRIBUTORS 


SUGGESTIONS  FOR  UNIFORM  ACCOUNTING  FRACTICE 

•  •  •  »  O  •  • 

Proration  of  Expenses:  (Contd.) 

Taxes:  (Contd.) 

Taxes  on  investment  property  must  be  charged  to  pro¬ 
per  investment  expense  accounts. 

Insurance : 

Insurance  on  Plant  Real  Estate  is  charged  to  Plant 
Real  Estate  Expense. 

Insurance  on  equipment  wherever  used,  (e.  g. ,  Insur¬ 
ance  on  auto  truck  is  charged  to  carting  expense  group,  etc.) 

Insurance  on  merchandise  charged  to  departments 
affected  in  ratio  covered. 

Liability  insurance  e.ccording  to  Pay  Roll,  is 
charged  to  departments  covered. 

Insurance,  as  incurred,  is  charged  to  Insurance 
account  in  General  Ledger  and  transferred  to  operating  on  a 
prorata  basis. 

Heat,  Light,  Power  &  Water: 

The  cost  of  these,  whether  of  production  or  of  pur¬ 
chase,  must  be  distributed  on  a  basis  of  use  or  service. 

Each  item  or  group  should  be  separately  determined 
and  distributed,  as  conditions  in  a  particular  company  sug¬ 
gest.  For  companies  producing  their  own  heat,  light  and 
power,  an  expense  department  should  be  created  with  same. 

Maintenance  &  Repairs: 

There  will  be  a  number  of  subdivisions  of  this 
group,  such  as  Motor  truck  repair.  Repairs  to  machinery, 
Repairs  to  buildings,  etc.  These  subdivisions  will  aid  the 
distribution ,  which  will  be  made  on  basis  of  service. 

In  case  of  Repairs  to  buildings  owned,  the  charges 
should  be  made  to  the  proper  reserve  account. 


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EAST EBIT  ASSOCIATION  0?  GLASS  DISTRIBUTORS 
SUGGESTIONS  FOR  UNIFORM  ACCOUNTING  PRACTICE 


•  •  •  •  •  •  » 

Proration  of  Expenses:  ( Contd . ) 

Supplies : 

All  supplies  not  of  a  minor  expense  nature,  should 
he  charged  to  Supplies  account  on  General  Ledger.  A  record 
should  he  kept  of  what  is  used  and  charged  monthly  into  oper 
ating,  and  distributed  to  departments  affected,  such  as 
Factory,  Packing,  etc. 

Lumber  used  for  packing  may  he  estimated  or  deter¬ 
mined  by  a  monthly  inventory. 

Supplies  not  followed  should  he  charged  directly  to 
operating  as  supplies  used. 

Freight  and  Carting  Outward: 

Outward  freight  hills  should  he  charged  to  Operat¬ 
ing.  Carting  should  he  charged  with  a  regular  schedule 
rate  for  same,  and  credited  to  Carting  Earned.  Inward  cart 
ing  would  also  he  charged,  and  the  "Carting  Earned"  account 
credited.  The  Carting  expense  group  would  readily  disclose 
whether  the  charges  were  adequate. 

All  carting  by  above  method  would  he  distributed  by 
departments  on  a  sound  basis. 

Depreciation: 


Provision  for  depreciation  must  be  distributed  to 
department  using  the  asset  depreciating . 

General  Warehouse: 


Minor  items  of  general  warehouse  expenses  should  be 
distributed  by  floor  space. 

Selling  and  Administrative  Expenses: 

As  a  uniform  method  for  distribution,  it  is  suggest 
ed  that  these  expenses  be  distributed  on  the  basis  of  sales. 
This  is  arbitrary,  and  does  not  reflect  the  facts,  but  is 
perhaps  the  only  standard  method  that  can  safely  be  offered 

at  this  time. 


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EASTERN  ASSOCIATION  OF  GLASS  DISTRIBUTORS 


SUGGESTIONS  FOR  UNIFORM  ACCOUNTING  PRACTICE 


Financial  or  Capital  Expenses  and  Income : 

Business  is  conducted  to  earn  a  return  on  capital 
invested.  This  return  is  a  composite  of  interest,  fair  com 
pensation  for  risk,  and  profit.  In  our  opinion,  no  interest 
on  capital  invested  in  the  business  should  be  allocated  to 
departments,  as  the  net  profit  of  the  business  reflects  or 
includes  the  interest  return  on  invested  capital. 

Cash  discounts  whether  earned  or  lost  should  be 
treated  as  income  or  expenses  due  to  capital  operations. 

Losses  due  to  uncollectible  accounts  or  those  ad¬ 
judged  bad  are  charged  against  the  combined  net  income. 

Bonuses  to  employees  if  based  on  a  certain  percent¬ 
age  of  profits  should  not  be  included  in  departmental  ex¬ 
penses.  For  this  purpose  we  view  them  as  profit  distribu¬ 
tion  rather  than  as  additional  salaries.  Bonuses  to 
officers  should  be  treated  in  like  manner. 

If  bonuses  are  granted  monthly  or  annually  by  a  pre 
determined  plan,  and  not  dependent  upon  profits,  they  should 
be  included  as  operating  exponses. 

Net  income  from  non-business  property,  from  invest¬ 
ments,  and  the  net  income  shown  by  real  estate  used  in  the 
business  belong  to  this  group. 


. 


EASTERN  ASSOCIATION  OF1  GLASS  DISTRIBUTORS 
SUGGESTIONS  FOR  CLASSIFICATION  OF  ACCOUNTS 


•  •  •  •  •  •  • 


PURPOSE: 


This  classification  of  accounts  is  intended  to 
serve  as  suggestions  for  the  accounting  departments  of  glass 
jobbing  houses,  but  in  order  to  meet  the  requirements  of  any 
particular  organization ,  it  must  be  adopted  aod  may  be  elabo 

rated. 

DEPARTMENTAL  AND  GROUP  DIVISIONS: 

Departmental  designation  of  expenses,  additions  to 
equipment,  etc.  may  be  made  by  numbers  only.  By  using 
account  numbers  arid  department  numbers  in  combination,  any 
particular  expense  item  may  be  classified  and  distributed  by 
one  designation.  (e.  3.  100-2  signifies  account  number  100 
and  department  number  2) 


ARRANGEMENT  OF  ACCOUNT  AND  DEPARTMENT  NUMBERS: 


1  - 

49 

Reserved  for 

Departmental  Designations 

50  - 

199 

Reserved  for 

General  Ledger  Accounts 

200  - 

359 

Operating  Expense  Analysis 

200-219 

Wages  8c  Salaries 

220-239 

Rent 

240-259 

Taxes 

260-279 

Insurance 

280-299 

Heat,  Light,  Power  &  Water 

300-319 

Maintenance  &  Repairs 

320-339 

Supplies 

340-359 

Freight  &  Carting 

360-379 

Depreciation 

380-399 

Miscellaneous 

400 

-  449 

Selling  Expenses 

450 

-  499 

Adminis trat ive  Expenses 

11 


EASTERN  ASSOCIATION  OF  GLASS  DISTRIBUTORS 


SUGGESTIONS  FOR  CLASSIFICATION  OF  ACCOUNTS 


DEPARTMENTAL 

DESIGNATIONS: 

Numbers 

Trade  Departments 

1 

2 

3 

6 

8 

10 

12 

14 

20 

Plate  Glass 

Sheet  Glass 

Rolled  Glass 

Factory- 

Sash,  Doors  &  Blinds 

Store  Front  Construction 

Glazing 

Paint,  etc. 

Miscellaneous 

Numbers 

Expense  Departments 

25 

26 

27 

28 

30 

Packing 

Carting 

Plant  Real  Estate  Expense 

Heat,  Light  &  Po7/er 

General  Warehouse 
(etc. ) 

50 

55 

60 

65 

70 

75 

80 

82 

83 

85 

88 

90 


EASTERN  ASSOCIATION  0 ?  GLASS  DISTRIBUTORS 


GENERAL  LEDGER  ACCOUNTS 
ASSETS 


Cash 

a-  In  Banks 
b-  Petty  Cash  Funds 

Accounts  Receivable 
a-  Customers 
b-  Sundry 

c-  Advance  to  employees 

Notes  Receivable 

a-  Customers  n 

b-  Sundry 

Inventories 

a-  Merchandise 
b-  Supplies 

Accruals 

Investments 

a-  Securities 
b-  Officers'  notes 
c-  Officers’  accounts 
d-  Dwellings 

Real  Estate  (Plant) 
a-  Land 
b-  Buildings 

Machinery  &  Fixtures 

Tools  &  Plant  Equipment 

Motor  Trucks  and  Cars 

Horses,  Wagons,  etc. 

Deferred  Charges 

a-  Unexpired  Insurance 
b-  Prepaid  Interest 
c-  Prepaid  Rents,  Taxes,  etc. 


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EAST ERE-  ASSOCIATION  OF  GLASS  DISTRIBUTORS 


GENERAL  LEDGER  ACCOUNTS 
LIABILITIES 


100 


105 


115 


125 


130 

131 

132 


Accounts  Payable 

a-  Accounts  Payable  (trade) 
b-  Sundry  Accounts  Payable 

c-  Accounts  due  officers,  stock  hoi  ders,  employees 

Notes  Payable 

a-  Trade  Creditors 
b-  Bank  Loans 
c-  Equipment 

d-  Officers,  stockholders,  etc. 

Accruals 

a-  Taxes 
b-  Pay  Roll 
c-  Interest 
d-  Rent 

Reserves 

a-  Bad  and  Doubtful  Accounts 

b-  Depreciation,  Plant  Buildings 

c-  Depreciation,  Investment  Buildings 

d-  Depreciation,  Improvement  of  Leased  Property 

e-  Depreciation,  Machinery  &  Fixtures 

f-  Depreciation,  Motor  Trucks  and  Cars 

g-  Depreciation,  Horses,  Wagons ,  etc. 

Mortgage  on  Plant  Real  Estate 

Mortgage  on  Investment  Real  Estate 

Chattel  Mortgage  on  equipment. 


NET  WORTH 

150  Capital  Stock  (or  155  Proprietors'  Capital  Accounts  ) 

Preferred  Stock 
Common  Stock 

160  Surplus 

161  Undivided  Profits 


14 


EASTERN  ASSOCIATION  OE  GLASS  DISTRIBUTORS 


GENERAL  LEDGER  ACCOUNTS 


PROFIT  AND  LOSS  ACCOUNTS 


The  following  Profit  and  Loss  accounts  will  be 
shown  by  departments.  It  is  desirable  to  distribute  the  ex¬ 
penses  by  departments  on  the  General  Ledger  at  the  closing 
of  a  fiscal  year,  and  monthly  in  an  Expense  Analysis  book. 

170  Sales  -  Warehouses 

171  Sales  -  Direct  Shipments 

180  Purchases  for  Stock 

181  Purchases  for  Direct  Shipments 

184  Inward  Freight 

185  Inward  Carting 

192  Operating  Expenses 

193  Selling  Expenses 

194  Administrative  Expenses 

195  Additions  to  Income 

a-  Cash  Discount  on  Purchases 
b-  Interest  on  Bank  Balances 
c-  Interest  Notes  and  Accounts  Receivable 
d-  Income  from  Plant  Real  Estate 
e-  Income  from  Investment  Real  Estate 
f-  Income  from  Securities 
g-  Bad  Accounts  Recovered 

196  Deductions  from  Income 

a-  Cash  Discount  on  Sales 
b-  Bad  and  Doubtful  Accounts  Receivable 
c-  Collection  and  Exchange 
d-  Losses  and  Contingencies 


15 


*  • 


EASTERN  ASSOCIATION  OT  GLASS  DISTRIBUTORS 


CLASSIFICATION  OF  ACCOUNTS 
(Continued) 


400  -  449  Selling  Expenses 

Advertising 
Salesmen's  Salaries 
Salesmen’s  Expenses 
Commissions 
Etc. 


450  -  499  Administrative  Expenses 

Executive  Salaries 

Office  Salaries 

Traveling 

Legal 

Donations 

Telephone  &  Telegrams 
Credit  &  Collections 
Postage 
Etc. 


Minimum  Requirement  in  Expense  Classifications : 

Some  jobbing  houses  may  not  require  detailed  analy¬ 
sis,  but  all  companies  adopting  a  uniform  system  should  re¬ 
quire  that  the  operating  expense  groups,  selling  and  adminis¬ 
trative  expenses  are  properly  allocated  to  the  various 
departments.  It  is  not  essential  that  the  items  of  each 
group  be  shown. 


16 


< 


. 


EASTERN  ASSOCIATION  OR  GLASS  DISTRIBUTORS 

COMMENTS 


SALES  AGOUNTS; 

All  sales  are  analyzed  by  departments.  Packing 
sales,  excepting  in  Window  Glass,  constitute  a  separate 
account.  Foreign  elements  should  be  eliminated,  and  the 
Sales  accounts  kept  pure  and  true  to  their  names. 

PURCHASE  ACCOUNTS: 


Departmental  accounts  are  kept  with  purchases. 
Packing  purchases,  except  in  Window  Glass,  are  changed  to  a 
Packing  Purchase  account. 

"Inward  Freight”  and  "Inward  Carting"  should  not  be 
charged  to  the  Purchase  accounts,  directly. 

Fre i ght  Inward: 

Inward  freight  on  purchases  is  most  conveniently 
charged  to  glass  purchase  accounts,  but  it  should  be  shown 
as  a  separate  item  and  analyzed  by  departments.  If  it  is 
not  considered  feasible  to  analyze  same  it  should  be  appor¬ 
tioned  by  percentage  on  basis  of  purchases,  or  according  to 
any  other  sound  basis. 

Carting: 


Carting  as  between  warehouses  and  freight  terminals 
is  itself  valuable  data,  as  it  indicates  the  cost  of  not  hav¬ 
ing  track  facilities. 

Inward  carting,  or  the  cost  of  conveying  merchan¬ 
dise  to  the  warehouses,  and  outward  carting  or  cost  of  deli¬ 
vering  merchandise  to  the  trade,  is  a  necessary  classifica¬ 
tion.  The  inward  carting  ranks  the  same  as  inward  freight, 
but  should  be  kept  separate. 

All  items  of  cost  making  up  this  expense  should  be 

grouped. 

INVENTORIES: 

EFFECT  ON  PROFITS: 

Book  profits  can  be  made  high  or  low  according  to 
the  methods  employed  in  taking  inventories.  Only  when  in¬ 
ventories  are  taken  at  cost  can  actual  profits  be  known. 


17 


EASTERN  ASSOCIATION  07  GLASS  DISTRIBUTORS 


COMMENTS 


•  »  *  »  •  •  • 

INVENTORIES:  (Confc . ) 


REPLACEMENT  VALUES : 

An  inventory  taken  at  replacement  value  will  include 
in  the  gross  profits  an  element  of  fluctuation,  the  amount 
of  which  cannot  be  known  without  average  cost  data. 

Even  when  replacement  valuQ  is  lower  than  cost,  it 
is  nevertheless  necessary  to  determine  the  cost  before  ac¬ 
tual  profits  can  be  shewn. 

Appreciation  and  shrinkage  of  values  should  not  be 
followed  on  the  ledger,  but  rather  in  an  executive’s  manual. 

AVERAGE  COST  OF  PLATE  GLASS: 


The  only  value  of  glass  that  may  be  safely  used  in 
calculating  cost  of  sales  and  inventory  is  the  average  cost. 

The  cost  of  glass  at  the  beginning  of  a  month  plus 
the  purchases  during  the  month  gives  the  total  feetage  and 
value  to  be  accounted  for.  By  dividing  this  total  value  by 
the  total  feetage,  the  average  is  obtained.  It  is  this 
average  price  that  is  used  in  finding  the  value  of  the  stock 
on  hand  in  any  bracket,  or  the  value  of  the  stock  withdrawn. 

The  total  feetage  withdrawn  from  any  bracket,  less 
the  total  feetage  returned  to  same  from  higher  brackets 
gives  the  net  feetage  the  bracket  has  been  reduced  or 
increased.  The  value  of  this  net  decrease  or  increase  is 
found  by  applying  the  average  cost. 

Accounting  Methods : 

The  following  records  are  necessary  to  compile  the 
information  necessary  with  which  to  calculate  the  Inventory 
and  the  Cost  of  glass  used  out  of  each  bracket: 

(1)  Purchase  Record 

This  record  may  be  a  card  or  sheet  on  which  is  tab¬ 
ulated  the  feetage  of  glass  purchased  in  each  month 
for  a  given  bracket,  arranged  by  prices.  It  will 
show  the  total  feetage  purchased  at  any  given  price. 


18  - 


EASTERN  ASSOCIATION  0^  GLASS  DISTRIBUTORS 


COMMENTS 


Account ing  Methods:  (Cont.) 

(2)  Used  Record 

This  should  be  of  similar  size  as  the  Purchase 
Record,  but  preferably  of  a  different  color,  and 
will  show  by  months,  a  tabulation  of  feet age  with¬ 
drawn  from  the  bracket. 

(3)  Returned  Record 

A  card,  preferably  of  another  color,  should  be  used 
on  which  to  tabulate  all  feetage  put  in  stock  from 
higher  brackets. 

(4)  Summary  Record 

Another  card  will  show  the  inventory  at  the  begin¬ 
ning,  the  purchases,  withdrawals,  returns,  and  the 
inventory  at  the  end  of  the  month. 

Cost  of  Plate  Sold: 

At  the  end  of  each  month  a  summary  should  be  made 
of  all  bracket  inventories,  shewing  the  total  inventory.  If 
this  total  is  deducted  from  the  sum  of  the  inventory  at  the 
beginning  and  the  glass  purchased,  the  balance  will  be  the 
cost  of  glass  applied  against  sales.  This,  however,  is  not 
only  the  cost  of  the  glass  sold  but  includes  shrinkages  and 
differences  arising  by  dropping  fractions  in  calculating  the 
average  cost  per  unit. 

By  calculating  the  value  of  net  feetage  withdrawn 
from  a  bracket  and  deducting  same  from  the  inventory  plus 
purchases,  the  balance  will  be  the  calculated  inventory. 


19 


if 


.  ' 

l  :  ■ 


. 


~ 


. 


EASTERN  ASSOCIATION  OF  GLASS  DISTRIBUTORS 


COMMENTS 


•  •  •  •  •  •  • 


Illustration  of  a  Plate  Glass  Bracket: 
1  to  2*3  S.  S.  Glazing 


Feetage 

Cost 

Value 

Jun.  1 

Ealance 

4,213 

.30 

$ 

1,263.60 

Purchases 

761  ft. 

.32 

243.52 

520  ft. 

.33 

171.60 

219  ft. 

.36 

78.84 

Freight  &  Drayage 

1,500 

30.00 

Average  Cost 

5,712 

.313 

9 

1,787.56 

Used 

957 

Returns 

100  857 

.313 

267.94 

Jan. 31 

Balance 

4,855 

.313 

1 

1,519.62 

Freight 

and  Cartage: 

Freight  and  Cartage  should  "be  distributed  by 
brackets  and  based  on  estimates  from  actual  freight  and  cart¬ 
age  bills  rendered  during  the  current  month. 


Beginning  the  System: 

An  accurate  inventory  should  be  taken  of  all  Plate 
Glass  by  brackets,  and  as  near  as  is  possible,  the  average 
cost  price  should  be  ascertained  for  each  bracket.  If  there 
is  any  doubt,  let  it  be  on  the  conservative  side. 


EASTERN  ASSOCIATION  0?  GLASS  DISTRIBUTORS 


COMMENTS 


•  •  *  *  *  *  a 


Illustration  of  Window 

Glass 

(Single) 

Av.  & 
Disc . 

Net 

Date 

For  Stock 

Boxes 

List 

Mar .  1 

Stock  on  hind 

7,725 

$>154 ,565.50 

.  1945 

$ 

30,078.45 

9 

Purchase 

98 

1,885.00 

80  % 

422.13 

12 

Purchase 

88 

1,782.00 

80  i 

373.9  7 

Totals 

— 

7,911 

1158,232.50 

$ 

30,879.55 

Sales 

500 

Frt.30^  a  box 

37.20 

7,411 

$158,232.50 

.1954 

II  i 

30,916.75 

This  shows  an  average  cost  of  .1954  which  is  approx¬ 
imately  SO  &  2#  off  list.  The  cost  of  sales  and  cost  of 
inventory  are  therefore  known  and  on  same  basis. 

The  illustration  does  not  include  inward  carting  nor 
cost  of  boxes,  which  must  be  considered. 

A  separate  average  should  be  found  for  single,  A 
double,  and  B  double.  If  the  manufacturers  make  further  sub¬ 
division,  corresponding  changes  should  be  made  in  the  classi¬ 
fication  of  the  accounts  used  in  finding  the  average  cost. 

COST  OP  SALES 


The  average  cost  of  glass  sold  may  be  determined 
monthly  by  the  methods  previously  outlined.  The  method  shown 
for  Plate  will  also  apply  to  Rolled  Glass. 


RENT: 


Plant  real  estate  should  be  treated  as  though  other¬ 
wise  owned,  and  a  fair  rental  paid  for  same.  This  fair 
rental  equivalent  must  be  distributed  as  an  expense  to  the 

departments. 

The  difference  between  the  "Estimated  Rental  Charge" 
account,  on  the  one  hand,  and  the  "Real  Estate  Expense"  ac-  " 
count  on  the  other,  reflects  the  estimated  net  income  from  " 

Real  Estate. 

The  "Rental  equivalent"  is  determined  by  the  total 
of  taxes,  insurance,  estimated  average  annual  repair,  depre- 


EASTERN  ASSOCIATION  OF  GLASS  DISTRIBUTORS 

COMMENTS 


t  •  •  •  •  •  • 


RENT:  (Cont.) 


ciation,  and  a  fair  interest  return  on  investment.  The 
interest  item  should  not  be  shown  on  the  books. 

The  Company  paying  rent  will  distribute  the  amount 

paid  for  same. 

PACKING: 


This  is  comparatively  a  small  item,  bat  by  follow¬ 
ing  the  costs  and  returns  from  same,  it  may  disclose  condi¬ 
tions  which  should  be  corrected.  The  cost  of  material  used, 
labor,  and  other  expenses  pertaining  to  packing  should  be 
conducted  as  an  expense  department. 

Window  Glass  boxes  are  charged  to  purchases.  The 
cost  of  packing  sold,  in  other  departments,  is  estimated  per 
case.  This  supported  by  inventories  will  serve  as  a  check. 

FACTORY  OPERATIONS: 

Standard  unit  costs  should  be  developed  for  pricing 
the  cost  of  sales  of  work  done  by  factory,  such  as  beveling, 
mirror  work,  etc.  The  cost  accounts  should  be  so  arranged, 
if  feasible,  to  accumulate  data  for  satisfactory  checking  of 
standard  values. 

FACTORY: 


Plate  glass  is  transferred  to  the  Factory  at  average 
cost  of  full  size  glass  used,  less  the  average  cost  in  the 
lower  bracket  of  glass  returned  to  stock.  Freight  and  cart¬ 
ing  are  to  be  included  in  the  average  cost. 

Warehouse  labor  cost  of  selecting  and  handling  such 
glass  should  be  charged  to  the  Factory  under  wages  and  sala¬ 
ries.  In  compiling  Factory  statement,  this  labor  cost 
should  be  shown  as  a  part  of  the  Glass  Cost. 


. 


EASTERN  ASSOCIATION  OF  GLASS  DISTRIBUTORS 


ILLUSTRATION  OF  DEPARTMENTAL  TRADING  STATEMENT 


Net  Sales  $  - 

Cost  of  Sales 


Purchases  $ 

Inward.  Freight 
Inward  Carting 


Inventory  beginning 


$ - 

Inventory  ending  $  -  — 

Transfer  - -  — -  -- 


Cost  of  Sales 


Gross  Frofit  - 


0 peratlng  expense s_ : 

Wages  &  Salaries  $  -  -- 

Rent  — 

Taxes  — -  — 

Insurance  - 

Heat ,  Light,  Power  &  Water  -- 

Maintenance  &  Repairs  -- 

Supplies  —*  *  — 

Freight  &  Carting  Outward  -- 

Depreciation  -- 

General  Warehouse  -- 


*  — 

Selling  Expenses  $  -  -- 

Administrative  Expenses  -  --  - 


Net  Profit  - 


Note 

In  a  factory  statement  all  operating  expenses  would  be 
shown  as  production  cost. 


u 


